The millennial fulcrum proves to be the tipping point for ‘old’ #banking
The financial crash has had many repercussions, but one unforeseen consequence has been that trust in banks and financial services among millennials – that’s anyone too young to remember a Sibos pre-2000 – is almost non-existent. And banks have to adapt if they are still to be relevant to the next generation of consumers.
This was the theme of the interactive Innotribe workshop yesterday, which aimed to tell the older generation at Sibos what young consumers are like and how the financial technology sector needs to adapt to cater for these people. After all, the children are the future… LOL.
Run off the back of a study by Claro and the Anthemis Group called Rethinking banking for an Always in Beta world, the workshop outlined millennials’ demands. These include brands that work with them to build mutual trust and relevance rather than consumer loyalty schemes.
Setting the scene, self-confessed “self-absorbed” millennial Steve Weiner, co-founder, Wharton FinTech, a US-based and student-led financial technology initiative, told delegates: “[we millennials] don’t want to have a one to one relationship with you; going to a branch is not the kind of experience we want; and we don’t build trust with brands, we look at building trust based on what our peers tell us via social media. This is trust model 2.0.”
By way of example, Weiner quoted figures from Scratch Viacom Media Networks that show that the bulk of millennial consumers would trust their internet service provider to provide financial services more than their bank. Also, three-quarters of them rely on social media to make purchase decisions, according to McKinsey. To put that in perspective, only one third trust traditional advertisements.
Weiner’s colleague and co-founder Dan McAuley, added: “We also trust businesses that have a social mission not just CSR [corporate social responsibility] as an add on. Facebook wasn’t set up to be a company,” he said, “it was set up to better connect the world. It had a mission.”
As a result millennials increasingly don’t want to associate with companies that don’t have the same ‘social mission’ and ethics as they do, Weiner added. Other digital brands such as Amazon, Google, Uber and Facebook have huge millennial consumer trust and all are making moves into financial services.
“As of June 2014, more than $5 billion in personal loans have been issued through The Lending Club social lending platform and Uber, a peer to peer taxi company, has its own integrated payment service that invisibly integrates the payment into the experience,” says Aldo de Jong, co-founder of Claro Partners, in the report.
So what can banks and financial services companies do to make themselves more relevant? According to de Jong, there are three simple steps that banks can take.
First, make it easy to use financial services. Look at other brands that your millennial customers use and see how easy they make it. Second, make it simple. Financial services are important, but millennials don’t see them as important, so make them seamless and easy to use. Finally, be genuine and share your mission with your customers.
To put these theories to the test, the millennials running the session got the largely non-millennial (legacy?) audience to complete some challenges. In four groups they had to come up with four digital ideas that could help banks deliver better trust, engagement, planning and financial management.
The teams came up with the following ideas:
- A socially-driven digital ombudsman, where disputes are sorted out by social media groups of experts;
- The concept of loans on demand based on pre-approval from your movements and lifestyle;
- Group lending via social media, where defaulters are cast out from the ‘group’; and
- A platform to amalgamate all financial identities – from mobile payments to bank accounts to Bitcoin and so on – into one online identity so customers can manage what they do better.
Audience voting produced an almost dead heat between all offerings so, in truly millennial style, everyone was declared a winner.